Slack is increasing in U.S. labor
markets and, with the presence of few signs of inflationary
pressure, is enabling central bankers to keep interest rates near
46-year lows, said Alfred Broaddus, president of the Federal
Reserve Bank of Richmond, Bloomberg reported.
The economy still has lots of excess capacity, particularly
in the labor market, where job creation lags the increase in the
working-age population, Broaddus said in an interview yesterday in
his Richmond office. Companies keep finding ways to be more
productive and put off adding workers, prolonging the time when
interest rates will have to rise to prevent inflation, he said.
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Declines in unit labor costs and slow growth in wages have
convinced Broaddus that disinflation, or the decline in the rate
of price increases, is more of a risk to growth than inflation,
even though energy and other commodity prices have risen in
recent months. Risks were equally weighted between the two
outcomes, the Federal Open Market Committee said in its March 16
statement accompanying its decision to keep the fed funds rate at
1 percent.
Bloomberg News
